Editor's note: I'm asking forgiveness from Mardy Grothe, whose first and last names I misspelled when citing his wonderful quote blog, www.drmardy.com, last month.
Risk is an interesting topic, my view of which has changed over the years. How we view risk when facing decisions and choices can have long term consequences. Three adjectives define the levels of the term that apply to my life, which has improved over time as I’ve grown from taking risk, to tolerating risk to managing it.
Risk taking: From ages 15 to 35, I was a risk taker. Pure risk taking is not brave, it’s stupid. As a young man, I engaged risky behavior with little precaution. Though my early business career, I let ambition outweigh more measured thinking and that caused huge ups and downs in my career. This culminated with abruptly losing a C-level job when our kids were only 4, 7 and 8. That led a change in my approach to defining my “risk tolerance” before “taking” risk.
The best example of risk tolerance was my preparations for starting my own business. I spent six months planning Contract Marketing’s July 4, 1988, debut. The plan had three elements: 1. Change our lifestyle to reduce the financial demands on the business, 2. Measure every source for revenue dispassionately and, most importantly, 3. Prepare a “worst case” scenario assuming my revenue-raising and budget cutting plans were unsuccessful. For this, Alice and I projected an exact amount of debt we were willing to take on, after which, as she liked to say, “you’ll have to go back and get a real job”.
By 1995, our business was on the INC500 list of fastest growing companies in the USA and “the sky was the limit”. However, due to over investing in growth, our bank in June of that year froze our assets, essentially closing our business. The next five years were our toughest since we had to find a way to grow while creating and mastering financial disciplines. Hiring a financial officer, Jack Zaback, and joining the peer group, TEC (Vistage) changed my life. Jack instituted weekly disciplines, and I spent one full day a month getting great advice from other business owners at TEC. As we set boundaries around financial investments, we were able to measure risk, before we took it. The lessons I learned from Jack and my peer group fit under a third label, risk management, which I still follow today.
Good risk management can be applied to every decision we make.
1. Each correct financial decision I’ve made since 1995 took days, weeks and sometimes months of research. Our partner, Jake Crocker, likes to call this approach the “belt and suspenders”. Let’s say our belt is investing in a new technology product but instead of all at once, we do that in stages. Put money in, assess how it’s going, put more in each time it grows. For the suspenders, we might identify where we can borrow money in case the product needs more capital to succeed.
2. Risk management applies to anything I do that is way outside my physical comfort zone. I can be nervous flying in a commercial jet, way more nervous is it’s a small plane and the thought of skydiving absolutely terrifies me. So, when my Air Force nephew, Michael, offered to take me up and check that one off my bucket list, I researched to better understand my risk. One person dies every 500,000 commercial airline miles flown, 1 in 300,000 skydives fail, 1 in 200,000 private planes crash. Punch line: All three succeed over 99.999% of the time so…I jumped with Mike. Personal note: other than the first 20 seconds before the chute opened when my jowls almost swallowed my face…it was awesome.
3. Relationships are the hardest to risk manage. The best method I’ve learned is to “trust but verify”. Getting “burned” when connecting is the most common concern we all have. Trusting someone is a huge risk. When I would say to my mom, “why don’t you trust me”, she would say, “Timmy, how do you expect me to trust you on this big issue when you let me down on small matters?” She was teaching me to trust but verify. I now let the trust rope out a little at a time, always hoping for the best but planning for the worst. In far too many relationships, I still find myself “driving the wrong way down a one-way street”.
Managing risk is both art and science, and it’s just good practice. Life would be boring if we took no chances and scary if we acted like I did as a young man.
Peace.
Tim McCarthy
Quote of the Month: Deepak Malhotra
“You, Zed, are asking them to be. But they have only learned to do."
---Deepak Malhotra, from “I Moved Your Cheese”.
Song of the Month: "Little Blue" by Jacob Collier
Editor’s note: I’ve played this many times since my sister, Felicia, shared it with me. Beautiful acoustic guitar playing, a virtuoso soloist, haunting voices in the choir and good camera movement on the video.
Book of The Month: “I Moved Your Cheese”, by Deepak Malhotra
Editor’s note: Each Christmas my dear friend, Sister Maureen Burke, gives me brain food, usually more than one book. This is my new bible for the enabler who lives in me. Malhotra gives reasonable respect to Johnson’s original twenty-million seller, “Who Moved My Cheese” by calling it “The Book” in this new parable. Three mice named Max, Big and Zed learn that following “The Book” has its limitations, primarily that it considers we are in a box, created by someone else. Well worth the one hour or less it will take you to read this!
Favorite excerpt: “Is it possible to pursue happiness if the pursuit itself does not make you happy”? OMG!!!!!!
Truly Funny: Notre Dame Game
This year’s college title game between Notre Dame and Ohio State brought back memories of my eldest brother, Bill, avid Irish fan inviting his little brother, Tim, two-time Buckeye, to South Bend in 1995. I was pleased that Bill let me sit in his premier seats which was a box with the top officials of Notre Dame, including at that time its famous President, Father Ted Hesburgh. As we sat, Bill leaned over and said, “I’m not going to make you root for Notre Dame, but if you so much as stand up or clap when something good happens for your team, you will be ushered to another seat.”
